Blogger Involved in FTC Lawsuit for Failure to Disclose

FTC Amberen LawsuitI was really excited about turning 40 because I kept hearing commercials on XM Radio about this terrific product specially made to help women 40 and over lose weight through balancing their hormones. Sadly, a little over a week before my 40th birthday, my bubble was burst when I saw that the FTC had filed a lawsuit against the company who markets the product, Amberen, for misleading claims. But it’s a good thing that I was paying attention to the product because it turns out that the suit actually may have an impact on performance based marketing because a blogger was involved.

Basics of the Case

Amberen is a dietary supplement. The FTC alleges that Lunada Biomedical (who markets and sells Amberen) engaged in “unfair or deceptive acts or practices” in the way that it marketed the product in the U.S. Specifically, they claimed that Lunada made unsubstantiated claims about weight loss and other health benefits of Amberen and misrepresented the findings of medical studies. In addition the “risk free trial” claims were false.

Carol’s Blog

One of the places that Amberen was marketed was through various websites including “Carol’s Blog” ( Carol was actually the president of “International Marketing Company” (presumably an agency) and not only agreed to write a blog that would promote them but would also appear in some of their other advertising. Carol was paid a flat rate of $2,000 per month plus various other fees and reimbursement costs.

According to the suit, the blog “appeared to be a personal account of [Carol’s] experiences with menopause, written in the first person and featuring [Carol’s] name and photo.” There was no disclosure on the site that Carol was being paid to promote Amberen on the blog.

The FTC claims that Lunada “failed to disclose, or disclose adequately, that certain of the consumer endorsers…had paid relationships with Lunada or were compensated in connection with their endorsement” and that the relationship would be “material to consumers in deciding whether to purchase Amberen.”

What Does This Mean for Affiliate Marketing?

Although Affiliate Marketing is not directly implicated in this case because Carol was paid a flat rate rather than on a performance basis, there are definitely some interesting things we can pull out of this case.

Note: These are all my opinions! Although I am a lawyer, none of them should be used as legal advice. They are merely my observations based on my studies of the law and my knowledge of blogging and affiliate marketing.

  • Merchant is once again held liable. In this case, even though the blogger is mentioned throughout the case and plays a part in the majority of the “deceptive practices,” the company producing and marketing the company is the one being sued by the FTC. I have not seen anything to indicate that Carol is being sued.
  • The blogger’s name is now associated with deceptive practices. Even though the blogger was not named in the suit, her name and her company are now showing up in search results related to FTC lawsuits. As bloggers, all we have are our reputations. Once you are associated with something like this, it’s almost impossible to make it disappear online.
  • Disclosure standards reiterated. The court specifically referred to “failed to disclose” and “material relationship.” These are the words that we are consistently seeing in the Guidelines from the FTC and any similar suits. They should be the basis of your own disclosure standards whether you are a merchant, an OPM, or a blogger.
  • Material to consumers. In this case, the FTC believes that Carol’s personal style of blogging (and perhaps her status as a nurse?) were enough to convince people to buy the Amberen. This is important when it comes to determining when something would be considered an endorsement that would convince someone to make a purchase based on your recommendation.
  • Agencies are likely liable. Lunada acted as both the distributor AND the marketing company in this case. In our lingo, that means they were both the merchant and the affiliate manager. They started the relationship with Carol. They gave her content ideas and reviewed the posts on her site. It’s the obligation of the merchant (or their agent) to monitor the content AND the disclosure for compliance.

Resources: For more information about the case, you can read the FTC release that summarizes it or the full complaint including exhibits. Although the blog is no longer online, you can see it using the Wayback Machine. Read more of my analysis of the .com Disclosures and how they apply to affiliates.

Have you as a blogger, merchant, or OPM taken steps to make sure that you are complying with the FTC Guidelines? Or are you weighing the risks and deciding that it is not likely you would be sued anyway?

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Affiliate Marketing and FTC: Free Webinar

One of the most important and yet least understood issues in Affiliate Marketing right now is FTC compliance. In large part it is because the FTC continues to issue only “Guidelines” and “Settlements” and not really specific directives. But that is, for the most part, how the FTC operates. The FTC issues Guides that are “interpretations” of laws. In this case, they are are interpretations of Section 5(a) of the FTC Act prohibiting unfair or deceptive practices in commerce. Basically–false or deceptive advertising.

That’s where affiliate marketing comes into play. By virtue of making money off of our sites and social media accounts or reviewing free products, we fall under this law and these Guidelines.

Last year when the new .com Disclosures were released, I wrote about how they applied to affiliates (Affiliates Take Note: New FTC Disclosure Guidelines). Since then I have written and spoken about them several times and continue to receive many questions. While I can’t tell you definitively what you should be doing, I can tell you what the FTC has said, how others are interpreting it, and what some best practices are.

On April 8, 2014, I will be conducting a free webinar with ShareASale titled “The FTC and You!” You can sign up through their site, and spots are limited.

Here are some of the things that I will be covering:

  • How the FTC Guidelines apply to affiliates
  • Revised Endorsement Guidelines and .com Disclosures
  • Is a “Disclosure” link or button sufficient?
  • Top v. bottom of blog post disclosure
  • Disclosure on Twitter and Facebook
  • Specific examples from the FTC and other sites
  • Monitoring and enforcing disclosure in affiliate programs

Whether you are a blogger reviewing free products, an affiliate marketer, an OPM, or a merchant, you need to understand how the Guidelines apply to you. If you have any questions in advance of the webinar, let me know and I will try to work them in!

(**Disclosure about disclosure–I’m an attorney, but I am not YOUR attorney. What I say should be taken only as legal information and not legal advice. If you believe you might be in violation, contact counsel for assistance.)

Please help me spread the word about this webinar. So many people need this information and do not even realize it.

Plus: If you want to stay in the “know” about issues like this, 1) be sure to sign up for my newsletter (right sidebar), and 2) follow me on Twitter and Google+.

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Affiliates Take Note: New FTC Disclosure Guidelines

FTC Disclosure for AffiliatesOn March 12, the Federal Trade Commission (FTC) updated its guidance for advertising disclosures in a guide called .com Disclosures: How to Make Effective Disclosures in Digital Advertising. The original guidance from 2000 left open many holes including advertising on mobile devices and places like Twitter and Facebook.

As affiliates, we have already been advised that disclosure must be “clear and conspicuous.” The new document goes even further. In fact, it specifically states that disclosure at the end of blogs posts is not acceptable. Here are some of the highlights from the guidelines:

  • Consumer protection laws such as the FTC’s prohibition on “unfair or deceptive acts or practices” apply to all media, including mobile devices.
  • Disclosures must be placed “as close as possible” to the claims.
  • If there is not room on the ad to disclose, it may be acceptable to make the disclosure on the page to which an ad links.
  • Scrolling should not be necessary to find the disclosure.
  • If it is too difficult on a particular platform to make disclosure clear and conspicuous, the platform should not be used for advertisements.
  • Advertisers should review their ads in the mindset of the “reasonable customer” and assume that customers do not read the entire page.
  • Pop-up disclosures should not be used. [Read more…]
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FTC and Affiliate Network Liability

FTC Affiliate Disclosure

The Federal Trade Commission (FTC) announced today that it has resolved its first deceptive advertising action against an entity described as an “Affiliate Network.” The settlement with the COPEAC network (known to affiliate marketers as a “CPA Network”) was the first of its kind since the FTC began cracking down on false or deceptive advertising by affiliate marketers. Whereas previously the merchant was held liable for the actions of the affiliates, this time the affiliate network itself was implicated both for its own actions and those of its affiliates.

Some key takeaways from this announcement:

  • The actions were regarding health-related claims on affiliate sites (acai berry and colon cleanse) that were made to look like news sites.
  • The actions were instituted as a result of consumer complaints.
  • The actions were settled by a consent decree that the FTC and the defendants entered into rather than a full litigation of the cases.
  • Affiliate Network was defined as “any person who provides any Defendant with Affiliates for an Affiliate Program or whom any Defendant contracts with as an Affiliate to promote any good or service.” This would mean that CPS networks are included as well as CPA networks.
  • “Endorsement” was defined as “any advertising message…that consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser.”
  • Material connection” was defined as “any relationship that materially affects the weight or credibility of any endorsement and that would not reasonably be expected by consumers.”
  • As in past FTC documents, we see the language that the “endorser” must disclose “clearly and prominently” the “material connection.
  • The Defendants will have to submit to the FTC certain documentation for any company that they might have an ownership interest in that would be impacted by the settlement compliance obligations for the next twenty years.

Although this situation was definitely an egregious one because it was clearly false advertising of unproven claims and was made to look like legitimate news, it does raise issues about the extent to which affiliate networks will be liable alongside affiliates and merchants who engage in these practices. In addition, it reiterates some of the things that the FTC has said in the past. Namely, the FTC is not out looking for sites that fail to disclose affiliate links. Instead, it is relying upon consumer claims to bring the sites to their attention. When the sites are brought to their attention, the FTC looks to the issues of “clear and prominent” disclosure of material relationships.

Do you think that this will bring about a change in the way that affiliate networks work with affiliates and merchants? At a minimum, I think that the networks need to:

  • Include disclosure language in their network agreements
  • Link out to the official FTC guidelines on the issues
  • Monitor the types of merchants that are joining their networks, in particular those most susceptible to false advertising claims like health and beauty merchants
  • Stay clear of creating landing pages and PPC ads themselves that might trigger closer scrutiny of themselves rather than just the actions of the affiliates.

The water is still murky but we all need to do what we can to make sure that we are not on the receiving end of one of these FTC actions because they threaten not only current revenue but apparently the business that we do for decades to come.

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My Unpopular View of the Pinterest Links

Pinterest Skimlinks Disclosure

Should Pinterest Disclose It Is Making Money?

Since the beginning of January, discussions about Pinterest have taken off everywhere. From my Bunco group to Affiliate Summit, everyone is talking about it for some reason. Initially it was because it was a cool, fun site that all my mom friends were using. Then it was because my affiliate marketing friends discovered a way to get traffic and make money from it. Now it’s because everyone thinks that they have been “misled” by Pinterest in some way. I have to voice my opposing view because it doesn’t seem like many people are.

At issue: Pinterest is converting user-generated links to merchants into affiliate links via a service called Skimlinks. As a result, Pinterest will make money if anyone makes a purchase through those links. In addition, affiliate marketers are creating links themselves and fear that their links may get overwritten by Pinterest’s affiliate links.

My disclosure: I’m a Pinterest user. I’m an affiliate marketer. I’m a Skimlinks dabbler.

The Affiliate Argument: I don’t think affiliate marketers have a right to be angry about anything. We’re using someone else’s site to try to make money ourselves. We never had a deal with Pinterest to begin with that we could place our money-making links on their site. If they do end up overwriting them, we can’t complain. They never said that we could place them there. We were taking advantage of their system and their traffic to make money. And we didn’t disclose it to anyone–Pinterest, our merchants, or all of the Pinterest users who click on our links. If it works out for us, great! If it doesn’t, it was a risk we chose to take understanding the way that social sites work.

The Pinterest User Argument: Pinterest users feel duped that Pinterest was making money off of them and they didn’t know it. From my perspective, we don’t have an argument there for a lot of reasons.

  • It’s a free service with lots of great functions. Surely everyone realizes that Pinterest had to make money somehow. There are no advertisements on the site. They aren’t selling our email addresses to anyone. How would they be making money?
  • The only links that they are making money on are the ones that you create to a merchant site. So you are already copying the content from the merchant when you “pin” it to Pinterest. How can you complain that it was your content to start with and Pinterest shouldn’t make money off of it?
  • Pinterest doesn’t in any way encourage you to buy anything through their links. They don’t review the merchandise. Your friends do. If you buy something, it’s not because Pinterest convinced you to, it’s because your friends did.
  • If you are going to buy the item anyway as a result of what you learned from the Pinterest site, why not allow Pinterest to make some money off of it? You don’t lose anything when they make money.
  • If you are pinning your own actual, unique content from your own website, Pinterest is not making any money off of it.
  • Do you know how many other sites make money off of you when you click on their links? Coupon sites don’t post coupons for you just to make you happy. Price comparison sites don’t exist just to help you out. Even a lot of forums let you chat away for free about whatever you want but then overwrite some of your words with Skimlinks. They all have affiliate links and make money when you click on their links and most of them don’t tell you. Are you complaining about those sites?

The Disclosure Issue: For some people, this is where it gets murky. Does Pinterest have to disclose that they are using affiliate links? The issue of disclosure in affiliate marketing is not clear. We do have to let our visitors know that we are setting cookies on their computers that collect certain data. The Pinterest Privacy Policy takes care of that. We also must not deceive our customers into buying something when we have a financial relationship with the seller. Pinterest isn’t representing anything at all. They aren’t writing reviews of products; the other users are. They aren’t encouraging you to visit merchant sites; the other users are. Does the fact that Pinterest might make money off of you if you make a purchase in some way take away from the experience that you are having on the site? I just can’t see why it would. The FTC Guides are about endorsements and testimonials, not links in general.

I’m truly interested in listening to opposing points of view on this. I’m sure that Pinterest will come out with some kind of disclosure policy just to make their users happy. They may also add something about affiliate links in general to their terms to warn affiliates about how they are treating their links. It would be helpful, but I don’t understand why it is required.

Links to other informational articles on the subject:

Pinterest is quietly generating revenue by modifying user submitted pins.

How Pinterest is secretly profiting from your links

What Affiliates and Merchants Should Know About Pinterest Links

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